A Roth conversion moves money from a traditional IRA or 401(k) into a Roth, and you pay ordinary income tax on the amount converted this year. In exchange, that money and everything it earns comes out tax-free in retirement. Whether that trade is worth making depends almost entirely on one question: is your tax rate this year lower than it will be when you would otherwise withdraw the money?
For a lot of people the honest answer is “I don’t know,” which is why the decision deserves a real look every fall rather than a rule of thumb. Here is how we walk through it.
1. Find the top of your current bracket
Pull up your expected 2026 income — salary, bonus, RSU vests, interest, anything else — and figure out where you land. The useful number is how much room is left before you cross into the next federal bracket. For a married couple filing jointly, the 24% bracket runs to roughly $403,550 of taxable income in 2026; the 32% bracket starts above that. Converting just enough to fill the current bracket, and no more, is the classic move. (Our 2026 tax table has the full bracket list.)
2. Look for a low-income year
The best conversion years are the ones where income dips: the gap between retiring and starting Social Security, a sabbatical, a year with a big deductible loss, or a year when RSU vesting happened to be light. If 2026 is one of those years for you, it may be worth converting more than usual.
3. Watch the side effects
The conversion amount counts as income for more than just your bracket. It can push you into a higher Medicare premium tier (IRMAA), which uses a two-year lookback — so a 2026 conversion affects 2028 premiums. It can also raise the tax on your Social Security benefits and reduce eligibility for certain credits. And California taxes the conversion as ordinary income too, with no preferential rate. None of these are reasons not to convert; they are just part of the math.
4. Know the rules that bite
Conversions cannot be undone. Since 2018 there is no recharacterization, so once the money moves, the tax bill is locked in. Each conversion also starts its own five-year clock before the converted amount can come out penalty-free if you are under 59½. And if you have any pre-tax and after-tax money mixed across your IRAs, the pro-rata rule decides how much of the conversion is taxable — you cannot pick just the after-tax dollars.
5. Pay the tax from outside the account
Converting $100,000 and having $24,000 withheld for taxes means only $76,000 lands in the Roth — and if you are under 59½, that $24,000 may be treated as an early distribution. Paying the tax from a taxable account keeps the full amount growing tax-free, which is the whole point.
The deadline is December 31
Unlike an IRA contribution, a conversion has to be completed in the calendar year to count for that year’s taxes. Custodians get busy in late December, so if you are going to do one, start the paperwork by early in the month.
If you would like help running the numbers on your own situation, schedule a call.
This information is for reference only and should be reviewed with a qualified professional as your situation may vary from others. Nothing mentioned above is a guarantee nor should this be considered advice. Tangent Retirement does not and cannot deliver tax advice and the material herein is for information only. Please consult a qualified tax professional for opinions related to your particular situation. Investment advisory services are offered through Tangent Retirement Inc., an investment adviser registered with the State of California. Registration as an investment adviser does not imply any level of skill or training. Investing involves risk, including the possible loss of principal.
